Accounting,
as such, is a wide subject which includes many areas of specialization. One of
them is forensic accounting. Accountants specializing in this field use
accounting skills to investigate and analyze financial information. They
generate reports, stating their findings, which are acceptable in the court of
law for legal use this field requires thorough knowledge about business, law
and finance, along with accounting skills.
With this kind of knowledge, financial accountants are able to identify fraud or embezzlement in a business organization. Forensic accounting is also useful to assess losses, in cases where financial compensation is asked for. In cases of divorce, forensic accounting comes into the picture for establishing adequate compensation required for spouse and child support. The field of forensic accounting is useful in many cases involving finance. However, it has its own set of pros and cons.
With this kind of knowledge, financial accountants are able to identify fraud or embezzlement in a business organization. Forensic accounting is also useful to assess losses, in cases where financial compensation is asked for. In cases of divorce, forensic accounting comes into the picture for establishing adequate compensation required for spouse and child support. The field of forensic accounting is useful in many cases involving finance. However, it has its own set of pros and cons.
Below are the advantages of forensic
accounting:-
1. Fraud identification and prevention – fraud is quite
common in big organizations where the number of daily financial transactions is
huge. In such an environment, an employee can easily undertake fraudulent
activities without being caught. Forensic accounting helps in analyzing whether
the company’s accounting polices are followed or not, and whether all the
transactions are clearly stated in the books of accounts. Any deviation
observed in the books of accounts can help in identifying fraud, and necessary
measures can be taken to prevent it in the future.
2. Making sound investment decision- As forensic
accounting helps in analyzing the financial standing and weaknesses of a
business, it provides a path for investors to make thoughtful investment
decisions. A company dealing with fraud is definitely not a good option for
investment. Therefore, the reports of forensic accountants act as a guide for
potential investors of a company. Many organizations also apply for loans from
various financial institutions. By performing a forensic accounting analysis,
such institutions can come to a decision on whether they would like to find a
company or not.
3. Formulation of economic policies- Various cases of
fraud that become evident after forensic analysis act as a reference for the
government to formulate improved economic polices that would be able to curb
such fraudulent activities in the future. By doing so, the government can strengthen
the economy and prevent such illegal activities in the country.
4. Rewarding career opportunity- As a career, forensic
accounting is extremely rewarding, as it not only involves regular accounting
activities, but also involves identification, analysis and reporting of the
findings during an audit. The acceptance of reports generated by a forensic
accountant by the court of law, gives them an upper hand as compared to other
accountants.
5. Forensic accounting provides expert witness in a
competent court of jurisdiction on matters of high technical relevance.
6. Forensic accounting is also helpful in personal injury
claims and motor vehicle accidents in quantifying the economic loses resulting
from a motor vehicle accidents and personal injury sustained in the factories.
7. Forensic accounting is useful in carrying out inquiry
in such a manner that he outcome will have application in court of law.
8. It serves as basis in dispute resolution in legal
matters
9. It provides accounting and auditing analysis
10.
Forensic accounting
is used in quantifying economic damages and calculation of economic loss
resulting from breach of contract it is sued to provide documentary evidence
and support in financial crime litigation.
11.
It is used to
reduce instance of business fraud and abuses.